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Appellate Court Dismisses Company’s Constitutional Challenge to CFPB’s Authority

gavel-two [1]The U.S. Court of Appeals for the District of Columbia Circuit has dismissed a constitutional challenge to the Consumer Financial Protection Bureau (CFPB [2]) brought about by Costa Mesa, California-based support services company Morgan Drexen Integrated Systems, according to multiple media reports [3].

A three-judge panel rejected the claims of Morgan Drexen and Connecticut-based attorney Kimberly Pisinski, who contracts with the company, by a vote of 2-1. The judges who rejected Morgan Drexen's and Pisinski's claims ruled that the company had no legal grounds to litigate. The court also rejected claims from Pisinksi and the company that the CFPB was in violation of the U.S. Constitution's separation of powers because it is not subject to Congressional oversight.

In an enforcement action against Morgan Drexen in 2013, the CFPB claimed that the company was misleading consumers and illegally charging advance fees for services relating debt relief.

Morgan Drexen sued the CFPB in 2013 after the Bureau asked the company to turn over thousands of sensitive documents relating to Pisinski's clients who had filed for bankruptcy. The company and Piskinski said the documents are protected by attorney-client privilege and that it is improper for the CFPB to "data mine" the confidential financial information of distressed consumers. View a copy of Morgan Drexen's complaint by clicking here [4].

Representatives from Morgan Drexen could not immediately be reached for comment. A spokesman for the CFPB referred DS News to the court's opinion [5] when asked for comment.

The federal district court in Washington, D.C., dismissed Morgan Drexen's lawsuit [6] in October 2013, and Piskinski subsequently appealed the district court's dismissal. Click here [4] to view a website dedicated to providing information on Morgan Drexen's lawsuit against the CFPB.

Testimony by CFPB Director Richard Cordray before the House Committee on Financial Services in early March prompted a flurry of proposals to reform the Bureau. U.S. Representative Sean Duffy (R-Wisconsin) introduced several [7] such proposals just days after Cordray's testimony, and in February, Representatives Steve Stivers (R-Ohio) and Tim Walz (D-Minnesota) revived a bipartisan bill [8] that would create an independent Inspector General for the CFPB that is appointed by the president and approved by the Senate.